Real Estate and OFAC: Screening Requirements for Title Companies

Title Companies and OFAC

Title companies sit at the center of real estate transactions. You handle the closing, disburse funds, and issue title insurance. That position makes you a critical checkpoint for OFAC compliance. If a sanctioned party is involved in a real estate transaction and it goes through your closing table without being flagged, you could face penalties.

OFAC's regulations apply to all US persons and businesses. Title companies are not exempt, and the real estate industry has been getting increased attention from regulators.

FinCEN Geographic Targeting Orders

Since 2016, FinCEN has issued Geographic Targeting Orders (GTOs) requiring title insurance companies to identify the natural persons behind shell companies used to purchase residential real estate in certain metropolitan areas. These GTOs were originally limited to a few cities but have been expanded repeatedly.

In 2024, FinCEN finalized a rule making these requirements permanent and nationwide through the Corporate Transparency Act's beneficial ownership reporting requirements and related regulations. The practical impact for title companies is that you need to identify and verify the beneficial owners of legal entity buyers, not just the name of the entity.

This matters for OFAC screening because a shell company will not appear on the SDN List, but its beneficial owner might. If you only screen the entity name and not the individuals behind it, you could miss a sanctioned party.

Who to Screen

For every closing, you should screen:

• Buyers: Including all individuals on the deed and, for entity buyers, the beneficial owners.
• Sellers: You are disbursing funds to the seller. Make sure they are not sanctioned.
• Borrowers: If there is a mortgage involved, the lender will typically screen the borrower, but screening on your end adds a layer of protection.
• Other parties: Powers of attorney, trustees, and anyone else involved in the transaction.

Beneficial Ownership: Why It Matters

Real estate has long been used to launder money and evade sanctions, often through shell companies and trusts that obscure the true owner. A sanctioned individual might not buy property in their own name. Instead, they might use an LLC, a trust, or a series of nested entities.

Title companies need to look beyond the entity name on the contract and identify who actually owns and controls the buying entity. This is not always easy, but it is essential. Ask for ownership documentation, and screen the individuals you identify.

Screening During the Closing Process

Here is a practical approach to OFAC screening for closings:

1. At file opening: Screen the buyer and seller names as soon as you receive the file. This gives you time to investigate any potential matches before the closing date.
2. After title search: If new parties are identified during the title search (additional owners, lienholders, etc.), screen them.
3. Before disbursement: Run a final screen before you release funds. This catches any new designations that occurred between file opening and closing.
4. Document and retain: Keep your screening results in the closing file.

What to Do with a Match

If your screening returns a potential match, do not close the transaction until you have resolved it. Review the identifying details. If it appears to be a false positive, document your reasoning and proceed. If it appears to be a true match, stop the transaction, do not disburse any funds, and consult with legal counsel about reporting to OFAC.

Do not inform the parties to the transaction about the potential match. OFAC rules prohibit tipping off sanctioned parties.

Getting Started

OFACScreen makes it simple for title companies to screen parties at every stage of the closing process. You can search individual names, run batch screens, or integrate directly with your title production software. Every search is logged with full audit details for your closing files.